Risks of synthetic ETFs


Recently I was wondering if using a synthetic ETF would be a more cost effective way to invest in less liquid markets. Before doing that, I wanted to consider the risks too. My two worries are:

  1. Counterparty risk: Considering all the rules on collaterals and splitting the risk, is in your opinion still a real problem?

  2. Professional investor: Being those ETF swap-based I was wondering if from a fiscal point of weiw they are considered stocks or might be considered derivatives and trigger the possibility of being considered a professional investor according to condition 5 of the Federal guidelines on the topic.

What do you think? And do you see other risks that I did not mention?

This is starting to get out of hand! Everybody thinks they‘re a professional trader

Using a swap based ETF certainly doesn‘t make you a professional trader in the eyes of the tax office.


I am not convinced that it is more cost effective. One of the reason for me to tell that is that Commerzbank had two lines of ETF on the DAX, one with partially swap and one with full physical replication. The TER was very similar and finally the ETF with swaps was converted to physical replication.
The reason for providing swap ETF was a fiscal reason (no income tax) but is not possible anymore today.